Ch. 28 Banking in the Digital Age Flashcards
(42 cards)
If a conflict arises b/w Articles 3 and 4, which article controls?
Article 4
What is a check?
- Special type of draft drawn on a bank (ordering bank to pay a fixed amount of money on demand)
How does Article 4 define a bank?
- “a person engaged in the business of banking, including a savings bank, savings and loan association, credit union or trust company”
If a brokerage handles a check for payment or collection, is the check covered by Article 4?
NO
To avoid payment or collection problems, what may a payee insist?
- Payment by an instrument that has already been accepted by the drawee
- E.g. cashier’s check, traveler’s check, or a certified check
If a bank wrongfully dishonors a cashier’s check, can the holder recover from the bank all expenses incurred, interest, and consequential damages?
YES
How does a teller’s check differ from a cashier’s check?
- Drawn by a bank on another bank
When may a teller’s check be used?
- When a person withdraws funds from one bank to transfer to an account at another bank
What is a traveler’s check?
Must be signed by drawer again when cashed
What is a certified check?
Bank accepted money and bank will pay check from its own account
A creditor-debtor relationship is created between whom?
- A customer and a bank when, for example, the customer makes cash deposits into a checking account
- Customer becomes creditor
- Bank becomes debtor
When a drawee bank wrongfully fails to honor a check, is it liable to its customers for damages resulting from its refusal to pay?
YES (customer does not have to prove that bank breached its contractual commitment or was negligent)
Who is liable to the payee or to the holder of a check in a civil suit if a check is dishonored for insufficient funds?
Customer
Does the bank have a liability to the customer if it properly dishonors a check for insufficient funds?
NO
What was the key question in the Afiriyie v. Bank of America case?
Whether the customer could bring a lawsuit for wrongful dishonor even though the check in question had been drawn on an account in the bank’s name
When the bank receives an item properly payable from its customer’s checking account but the account contains insufficient funds to cover the amount of the check, what are the bank’s two options?
1) Dishonor the item
2) Pay the item and charge the customer’s account, thus creating an overdraft
If a bank has an “overdraft protection agreement” with a customer, but fails to honor a check b/c it would create an overdraft, would this be treated as a wrongful dishonor?
YES
What is considered a stale check?
- Check that is presented for payment more than 6 months from its date
What is a stop order payment?
- Order by a customer to his or her bank not to pay a certain check
What is the general rule when a bank pays on a forged signature?
Must recredit customer’s account
Sometimes the same wrongdoer forges the customer’s signature on a series of checks. To recover for all of the forged items, the customer must do what as stated by the UCC?
- Customer must discover and report the first forged check to the bank w/i 30 calendar days of the receipt or availability of the bank statement
- Failure to notify the bank w/i this time period discharges the bank’s liability for all forged checks that it pays prior to notification
What does TISA stand for?
Truth in Savings Act
The bank collection process operates under which article of the UCC?
Article 4
What do you call the first bank to receive a check for payment?
Depositary bank
